Managing Financial Difficulty

Many of us will suffer financial difficulty or hardship at one stage or another in our lives. Whether it's overuse of credit, too many bills arriving at once, ill-health, losing a job, or an unusual turn of events, the reality is a financial crisis can happen to anyone.

Research into the financial habits of adult Australians, conducted by McGregor Marketing Research (1988), found that a large number of us are struggling to manage our finances:

one in five, 20% admit to having no particular budgeting strategy;

one in four, 28%, say they make impulse purchases outside their normal budget;

one in five, 22%, make a large number of shopping trips that cost more than intended;

one in eleven, 9%, have no money set aside if several bills were to arrive at once, and would need to strike up a payment plan with one or more of the companies concerned to pay off the debt; and

one in six, 17%, are forced to spend on unexpected bills during any given month eg. motor vehicle repairs, breakages and urgent replacement of household goods.

These sorts of money problems are spread throughout the community. Financial problems are found in all types of households, irrespective of people's age, sex, marital status, occupation or income. It's not just a problem for the unemployed!

A large proportion of us are simply unprepared to handle a financial crisis. Some don't have the skills to manage their money prudently. Others ignore the warning signs and fall into a debt trap. Whatever the causes, the consequences can be devastating.

This section helps you to deal with a financial crisis. It provides practical information to enable you to take control of your finances and be better prepared for the unexpected. It also contains information on who you can turn to for help in sorting out your money problems.

As many people say, prevention is better than the cure. We can refer you to a Financial Planner for expert advice on managing your superannuation, saving for your retirement or investing your redundancy payout. They will help you to make sensible long-term financial decisions. However, if you are already finding it difficult to cope with day to day financial pressures, you should consult a Financial Counsellor who is trained to help you resolve current money problems and put you back in control of your finances.

10 steps that you can take to avoid falling into a debt trap include:

Draw up a budget - which has savings goals and spending priorities - and stick to it. Use our budget calculator. Have an emergency fund equal to three months income

Avoid impulse purchases and frequent trips to the shops - put things on lay-by if you must have them

Use your own money to pay for goods and services as much as possible eg. cheques or debit cards are convenient ways of accessing your funds

Pay the balance on your credit card balance off each month especially after New year

If you regularly carry a credit card balance over from one month to the next, make sure the interest rate on the card is reasonable

If you have several loans including lots of credit card debt, consider consolidating the loan balances into one personal loan - this will give you the opportunity to clear the debt, with one set of repayments, over a fixed period of time. Learn more about our Personal Loans.

If you are experiencing problems, talk to your creditors straight away. You may feel awkward and embarrassed, but it is important to let your creditors know what is happening. Most creditors will be pleased you have called to inform them about the situation. When they haven't heard from you, they will think the worst. Avoiding creditors only puts them off side. Before you talk to them, sit down and work out what you are going to say. Take the time to think about what money you have coming in and what money you are spending. Prepare a money plan so you can make an offer to your creditors that is realistic and within your means.

Tip

Don't make promises you can't keep. It will make negotiation that much harder in the future. You are not alone. Removing the fear of a financial crisis should be an important priority for all of us. Unfortunately, crises will happen so it's best to have a sound budget and savings goals that can cope with life's emergencies.

Any advice or information on this site does not take into account your personal objectives, financial situation or needs and you should consider whether it is appropriate for you. Please review our Account & Access Facility Conditions of Use and Financial Services Guide before acquiring the product.